Chardan Capital Markets downgraded Arrowhead Research (NASDAQ: ARWR) from Buy to Neutral with a price target of $2.00 (from $8.00) on EX-1 RNAi program discontinuations.

Analyst Madhu Kumar commented, "As previously highlighted, the Bear Case for ARWR has occurred, with broad loss of the EX-1 based clinical pipeline. In our 10 November 2016 company note, we highlighted both bullish and bearish scenarios for Arrowhead after the FDA's announced clinical hold for the Heparc-2004 clinical study of ARC-520. In particular, we stated that, due to the use of EX-1 DPC technology across Arrowhead's clinical pipeline, "the clinical hold could reflect a widespread risk to the Arrowhead platform." The announced discontinuation of EX-1 clinical assets confirms this risk, leaving us with little visibility on Arrowhead's development program moving forward."

The analyst sees little read-across to the RNAi space. "Because the ARWR discontinuations are associated with the DPC platform and not the RNAi drugs, they should have minimal read-across to the RNAi space. To our understanding, the Arrowhead clinical hold for Heparc-2004 was due to deaths in "a nonclinical toxicology study in non-human primates using EX[-]1, the company's liver-targeted, intravenously administered delivery vehicle." As the clinical hold was based on deaths from a study using EX-1 without a RNAi drug, competing assets in the RNAi space like ARB-1467 and ARB-1740 from Arbutus (Buy) and ALN-HBV and ALN-AAT02 from Alnylam (Buy), which do not use a DPC like EX-1, to us should not face similar safety risks."

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